New Delhi : With the GST Council expected to meet soon, there has been a lot of talk about the views of restructuring of GST, rationalization of rates, pros and cons of the ceiling. The online skill gaming sector, a recognized Sunrise sector, which has received a lot of positive response from the Center recently, is awaiting a hearing on GST due to several different reasons.
The online skill gaming industry has been on an upward trend since the last 4-5 years and the pandemic has brought the industry into limelight, growing at a CAGR of 38 per cent.
According to a recent BCG report, this sunrise sector in India has gained significant momentum with excellent internet service providers, penetration of mobile usage across social and demographic barriers and India’s enthusiasm to adopt and optimize online gaming platforms. is of.
India’s share currently accounts for 1-2 per cent of the global gaming market with a market size of $1.8 billion, of which real-money gaming has the largest revenue pool driven by a high user payout trend (about 20 per cent of the total market size). component. The total number of users of gaming services is close to 433 million and is expected to reach 650 million by 2025. However, apart from fixing the regulatory mechanism, there is an urgent need to look at the GST imposed on this sector.
The Group of Ministers (GoM) constituted by the GST Council to examine the taxation regime implemented on online gaming on May 24 last year was seen as a progressive step, with the industry expecting to see a stable and clear taxation regime. However, the committee was dissolved and a new one was formed in February 2022.
Currently, the services provided by the online skill gaming platform are classified under Service Accounting Code 998439 of the GST classification of services and attract a rate of 18 per cent through this. Gross gaming revenue (GGR) for the service provider whereas, 28 per cent GST is levied on game of chance (including gambling, casino and more).
Industry operators believe that the legislative approach, as proven by jurisprudence several times in the country, clearly separates the game of skill from the game of chance and therefore the taxation imposed continues to take this discrimination into account. should keep. Furthermore, international practices relating to taxes on gaming have proven that the tax rate should not exceed 20 percent. Some developed economies like UK, US (Pennsylvania), Singapore have GGR rates of 15 per cent, 14 per cent and 7 per cent respectively. A report by Copenhagen Economics (one of the leading economics firms in Europe) also concludes that a tax rate in the range of 15 percent to 20 percent of the GGR produces the most favorable results for both operators and tax revenue.
Malay Kumar Shukla, Chief Legal & Compliance Officer, Games24x7 says, “The international experience relating to taxation of gaming in the context of platform fee/GGR based gaming model has clearly shown the downside of excessive taxation. The GGR-based gaming platform can only absorb an optimum range of taxation which is in the range of 15 per cent to 20 per cent of the GGR. The high tax incidence of the tax is bound to change player and compliance behavior and will neither work in the advantage of the gaming industry nor the government. Therefore, the interpretation of taxation of gross gaming revenue by the ‘games of skill’ industry in India is supported by the legal provisions of the GST law and is also in line with most international practices relating to taxation of gaming platforms.”
At a time when the country has seen positive tax policies for some of the other identified sunrise sectors such as biotechnology, chemical and renewable energy; It is only legitimate for this fastest growing tech industry within the M&E sector to demand a GST regime that can protect and promote this segment.